How this family got creative to eliminate $200,000 in law school debt

Erik Furer started at Seattle University School of Law in 2004
with no debt. He graduated in 2007 with $200,000 in student
loans.

After graduation, he got a job as an assistant city attorney in
the Seattle area. He eventually married and had two daughters.

Erik's father, Hans Furer, says his son wasn't really thinking
about the debt he would graduate with — and how he would pay it
off — when he started law school.

"The problem that people at his age have is, they're really not
exactly comprehending and realizing what will happen four or five
years down the road," Hans says. "They're single, they can handle
their finances. So it's basically the typical story of somebody
who got married, had kids, bought the little townhouse, and
started to realize that he was really financially in trouble."

Seven years after graduation, Erik was still struggling to make
his $1,700-$1,800 loan payments every month — he could only
manage to pay about $1,500 at a time.

That's when his parents decided to help.

Hans and his wife owned a house in Los Angeles, which was valued
around $1.3 million. They bought the house in 1979 at a 12%
mortgage rate.

"Over the period of time that we owned the house, we refinanced
three times, and the last time we refinanced, we turned the
mortgage into a 10-year period," Hans says. "And we probably paid
it off five or six years ago."

Erik's younger brother, Peter, had stumbled across a company
online called Lenda, which
allows people to refinance their homes online, as opposed to
going through a bank. He suggested that his parents look into
it.

After discussing options with two local banks he and his wife had
used before, Hans says he decided to go through Lenda, which
eliminates the need for a loan officer, for better interest rates
and lower fees — nowhere near the $10,000 in refinancing fees one
bank had quoted him.

The decision to refinance wasn't an easy one."The hardest thing
was probably making the decision to do it," Hans says.

The Furers had not paid for either of their children's
undergraduate educations. Instead, Erik and Peter had received
scholarships and grants and some help from their grandparents.
But Hans and his wife felt it was their responsibility as parents
to step in and help Erik, even though he had not asked.

Erik
Furer with his wife and two daughters.Erik Furer

"He was not pushing," Hans recalls. "He didn't bring up the idea,
but we just felt he's a dad with two kids working hard. He's
doing the best he can, and as parents that's what we could do for
him, and it was obviously very much appreciated."

Since their house was already paid off, the Furers refinanced in
order to get what's called a cash-out loan — receiving cash from
the equity of their home.

Hans and his wife were able to secure a loan for $210,000, with a
30-year fixed term at an interest rate of 3.125%. Erik used this
loan to pay off his student loan debt, and is now paying the
refinance loan back to the bank with a monthly payment of $899.60
— roughly half of his original monthly payment for his student
loans.

In other words, the Furers allowed Eric to borrow against the
equity in their home without any fees.

Looking back, Hans admits he and his wife should have spoken up
when Erik chose where he wanted to go to law school.

"As parents you always feel that you raise your kids to be able
to make important decisions, and what I know now is that Erik
could have gone to law school closer to where we are, probably
lived at home, and could have probably gone through the process
of graduating and passing the BAR with half the debt," Hans says.

But that doesn't mean that Hans regrets his decision to
refinance. If need be, he says he would do it again.

"Whatever cash is in the house will belong to the kids one day
anyway," Hans says. "So if they get something now instead of when
we're dead, why not?"